30 July 2024 01:34 am Views - 139
By Nuzla Rizkiya
|
Suresh Gooneratne
|
As the global regulations tighten and consumer demand for eco-friendly products grows, complying with the sustainability standards is becoming a major challenge and opportunity for the corporates in the country, according to DIMO Chief Financial Officer (CFO) Suresh Gooneratne.
The International Financial Reporting Standards (IFRS) have now absorbed a lot of organisations that are involved in sustainability reporting. The standards now are focused on the mandatory requirements coming from the risks and opportunities that will affect the future cash flows, cost of capital or access to finance.
“Sustainability-related risks are a standard they definitely want us to look at,” Gooneratne said while addressing a panel discussion on navigating the environmental, social and governance (ESG) dynamics at the CMA conference held last week.
The ESG standards, which increasingly focus on various areas, including biodiversity, ecosystems and services, are designed in a way to ensure the companies manage sustainability-related risks and opportunities effectively.
This means increased attention will be directed at the sustainability factors in products across the entire supply chains.
“Up to now, only the exporters were very concerned about sustainability because their buyers will not buy. But now, most of these regulations will make sure that their whole supply chain, downstream, upstream, both will have to be sustainability compliant,” Gooneratne stressed.
He went on to elaborate that sustainability compliance not only would assist the companies to meet the mandatory requirements but it would also help them seize better market opportunities.
With the rising number of environmentally-conscious consumers, especially among the younger generations, integrating sustainable practices into product operations will allow businesses to better position themselves to compete in international markets.
“Generally, when you come up with sustainability-related friendly products, your brand image enhances automatically. So, that enhances your corporate plan, employer plan and gives you a competitive advantage in the global market,” Gooneratne said.
However, he also warned the businesses about the risks associated with non-compliance and the stringent nature of international regulations, citing as an example the recently enacted German Act on Corporate Due Diligence Obligations in Supply Chains, which obligates the German companies to respect human rights and environmental protection by implementing defined due diligence measures.
Under the act, the Sri Lankan exporters too are now required to comply with the legislation by maintaining high sustainability standards and producing high value-added products when exporting goods to Germany.
“If we do wrong things, the public (consumers) will come with objections, affecting our reputation. So, if we don’t behave responsibly, it will be very hard to get good employees along with the regulatory risks. In time to come, we will need more certifications and even if you are an importer, things are going to be more stringent,” Gooneratne said.
PIC BY PRADEEP PATHIRANA